TSMC details impact of fab 14B photoresist material incident

TSMC is updating its first quarter 2019 guidance following the completion of the assessment of all the wafers affected by a batch of problematic photoresist material.

TSMC discovered that a batch of photoresist from a chemical supplier contained a specific component which was abnormally treated, creating a foreign polymer in the photoresist. The foreign polymer created an undesirable effect on 12/16-nanometer wafers at Fab 14B. This effect was detected later on when the wafers deviated from normal yield, according to an update from TSMC.
"To ensure the quality of our wafers delivered to customers, we have decided to scrap a higher number of wafers than our earlier estimate," the company writes.
TSMC expects that this incident will reduce the company's Q1 revenue by about USD 550 million, gross margin by 2.6 percentage points, operating margin by 3.2 percentage points.
The wafers scrapped in Q1 will be made up in Q2, says the company. This will contribute about USD 550 million to Q2 revenue, increase gross margin by 1.5 percentage points, operating margin by 2.1 percentage points.
For full year 2019, this incident is forecast to reduce gross margin by 0.2 percentage point, operating margin by 0.2 percentage point.
At the same time, TSMC has taken action to pull in certain production from Q2 and has seen some increases in demand. These will result in about USD 230 million of additional revenue in Q1.
Including the above factors, the company now expects Q1 revenue to be between US$7 billion to US$7.1 billion, Q1 gross profit margin to be between 41% and 43%, and Q1 operating profit margin to be between 29% and 31%.
Since TSMC discovered the yield issues caused by the problematic material, it has maintained constant communication with affected customers and has worked out replacement and delivery schedules with each of them. TSMC has taken action to strengthen inline wafer inspection and tighten control of incoming material to deal with the increasing complexity of leading-edge technologies.